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BUSINESS AND MANAGEMENT, CASE STUDY 2006 (for May and November)
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1. Develop a Porter Industry analysis for Sungen. Explain your answer
a. Threat of new entrants
• Government policies in the industry (easier to enter)
• Sungen first mover will give the core advantages deferring others entrance (market share, positioning, loyalties, economies of scale, learning curve)
• High capital requirements
• Skills required to participate in the industry
• Differentiation, consequence of customization
• Reduction in cost of houses (reduce threat of new entrants)
b. Bargaining power of suppliers
• Limited number of suppliers will give great power to them
• The good supplied is vital component of finished good (bargaining power increases)
c. Bargaining power of buyers
• Sophisticated good considered exclusive, not everyone will be able to pay for it, so power of buyer declines
• Differentiation will reduce bargaining power
• Switching cost to electricity?
• Lot of potential buyers
d. Substitutes
• Electricity
• For Electrical Solutions LTD. there are many substitutes since conglomerates invaded Australia and they are now price sensitive, it means people will choose basing on the lower prices.
7. According to the case, (line 27), Electric Solution should enter into a diversification program, into what areas should the company diversify its operations.
The case establishes that Electric Solution has been working for a time in the electric industry and now is willing to enter the renewable resources industry. This type of diversification is known as unrelated diversification because this company is changing to a completely different industry. By entering a new industry, completely unknown and untouched, Electric Solutions needs to have well trained employees who are specialized in this area in order to develop these products which are very complex. The company should consider that the costs of training employees will be high since few people know about the production of solar products. Moreover, the company has to spend money in a thorough market research in order to know if their product will be accepted. Also, once established in the market they need to consider that they need to develop strong marketing strategies because people don’t not know much about this renewable resource so they need to be educated so that they can know how to use it. Moreover, the company has to invest in the facilities for the development of this product which will be extremely expensive so they will need to spend a lot of money in investment.
8. What considerations should be taken by a firm considering changing of direction to a new market? How does this change could impact the firm’s mission statement?
The firm should analyze the environmental trends, and anticipate unexpected events. The things that should be taken into account are:
• Competitive intelligence, which has to do with market share information, competitor’s innovations, and come out with strategies to manage the situation in a favorable way.
• When you go international; how the domestic, foreign and international forces can affect you. Also and most importantly, examine the entry barriers imposed by governments like: infant industry protection, price controls, quotas, tariff barriers, and also the industry type and behavior, which could be monopolistic or could apply dumping techniques.
• Another consideration is the international product life cycle, since in one country the product could be just going through introduction while in others it is already a mature product.
• A SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats) and the value chain requirements from the new market should be examined.
• The STEP (Socio-cultural, Technological, Economical and Political-Legal forces)
It is important to have a clear mission statement and attach to it, to the procedures and to the objectives of the company, because the firm might lose focus because of the distractions that the external environment could present, and by trying to adjust to the new market, it could start doing things against the company’s initial mission statement.
9. What advantages can be gained by being the first mover.
By being first movers, Sungen has many advantages. One of the biggest advantages is that since it is the pioneer, people will have it as the pioneer and more experienced company in the market so they will prefer buying products from them since they are more qualified with this product’s development. In other words, Sungen Ltd. Will be creating consumer loyalty because of the preference they have among customers. Also, since they are the first to produce this product, people will trust more their product since they hav e already been used and their quality has been correctly tested. Moreover, since it has consumers’ loyalty, their positioning will the best among every other competitors because the image they have will be that they are the best among every other because they are the first ones in the market. As a consequence, since more consumers will be buying more products from this company, this means that its market share will increase and they will be the leaders in the market. Furthermore, since people are trained and updated for the development of this product, their experience curve is high and they will be able to train future employees reducing training costs in a company from a 20 to a 30%. Sungen Ltd. has to consider all the advantages it has from being pioneers, first movers, and once established in the market, it should be aware of its competitors because they will imitate its every movement and if well done, then people might consider the fact of changing from supplier.
10. Develop a SWOT analysis for Sungen.
11. What are the benefits and constrains of using JITI system
Benefits
• Lower warehouse costs because stock is not stayed, it is delivered as asked.
• Reduces investment in inventory
• Reduces shortage cost.
• Better control over costs (carrying cost is reduced)
• Better relationship with suppliers
• Improve cash availability (money is not freeze in inventory)
• Reduce cost of inventory that will affect cost of sales.
Constrains
• Delays on delivery equipment to customers causing dissatisfaction because they relay specifically on suppliers.
• Ordering costs increases
• Highly dependable on suppliers, is the center of all customers problems because the bargaining power of suppliers, Sungen cannot control the quality of the product or any delays the suppliers have, causing dissatisfaction and possible lost of customers; a satisfied customer brings 5 new customers, a dissatisfied makes loose 10 customers.
• Cost of implementing communication suppliers; because they need to be in constant contact with the supplier it rises the cost of communication, telephone bills, mailing, etc.
• There is no chance to meet unexpected demand because they need to ask the suppliers and depend on their response or according to their time of production, creating risks to loose customers.
• Do not have the ability to reduce costs and increase profit if they keep stock and prices rise or inflation increase, because they order and sell at the same time, so they cannot have that certain chance.
• Increase ordering cost.
• Production highly dependable on supplier’s compliance with delivery times.
• Need to be close to suppliers.
• Cost of implementing communication channels with suppliers.
12) SunGen manufacturing approach is to develop customized goods. Mention advantages and disadvantages of employing this approach. Mention advantages and disadvantages of employing this approach. You must cover the production, marketing and financial areas.
SunGen customized goods have three types of production process:
Process Focus:
 This process has low volume
 High variety of goods.
 Variable cost prevails
 Finished goods are to order not to store
 Cost estimated prior the job, but its only known after the good is finished
 Skilled labor
 High customization
Repetitive Focus
 Assembly line modules
 Employees are moderately trained
 Fixed costs/variable costs are in balance
 Fixed cost managed by degree of flexibility of the firm
 Just in time inventory is required
Product Focus
 High volume, low variety of goods (paper, steel, aluminum)
 Variable costs are low but fixed costs are high
 Low skilled labor
 Production is forecasted
 Finished goods are stored
 High standarization
13. Advantages and Disadvantages of Sun Gen Ltd working at full capacity.
Advantages
 Economies of scales
 High turn over (high sales)
 Fix cost per unit will decline
 Efficient resource utilization
 Better allocation of resources, don’t have misused resources
 Good value chain implementation.
Disadvantages
 Not possible to meet unexpected demand without incurring in high costs (extra hours, quality declines consequence of fatigued employees and lack of motivation, potential higher cost of material
 In order to improve production, you need high investment in new factories machinery (long-term)
 Creation of night shift of employees (high costs)
 Seasonal/ cyclical nature of demand doesn’t justify investment in new factories
 Cost of outsourcing production (potential high monetary cost and lack of control over quality
 Variable cost increases-marginal contribution declines
14. What alternatives are available for Sungen in order to deal with unexpected demands that would be impossible to be covered by the firm as a consequence of not having available capacity to satisfy an unexpected demand?
An alternative for Sungen can be to have a surplus of electrical equipment. This means that they could have a warehouse in which they can have many electrical equipments. So if there is a demand for the products, they can have enough of them, instead of being assembled as soon as an order is received from customers; this means that Sungen holds minimal levels of stock. Also what Sungen should worry about is about their employees, because many of the production staff are expressing their concerns about the unpredictable nature of the hours they are expected to work. Employees in Sungen had a hard work, because they have to assemble the solar equipments as soon a customer wants it, so Sungen should motivate their employees, and give them flexible work hours or compress work week, payment for their performance, etc. Workers will be offered a certain number of hours each week according to the level of demand. A proportion of workers will be placed on temporary contracts.
a. Threat of new entrants
• Government policies in the industry (easier to enter)
• Sungen first mover will give the core advantages deferring others entrance (market share, positioning, loyalties, economies of scale, learning curve)
• High capital requirements
• Skills required to participate in the industry
• Differentiation, consequence of customization
• Reduction in cost of houses (reduce threat of new entrants)
b. Bargaining power of suppliers
• Limited number of suppliers will give great power to them
• The good supplied is vital component of finished good (bargaining power increases)
c. Bargaining power of buyers
• Sophisticated good considered exclusive, not everyone will be able to pay for it, so power of buyer declines
• Differentiation will reduce bargaining power
• Switching cost to electricity?
• Lot of potential buyers
d. Substitutes
• Electricity
• For Electrical Solutions LTD. there are many substitutes since conglomerates invaded Australia and they are now price sensitive, it means people will choose basing on the lower prices.
7. According to the case, (line 27), Electric Solution should enter into a diversification program, into what areas should the company diversify its operations.
The case establishes that Electric Solution has been working for a time in the electric industry and now is willing to enter the renewable resources industry. This type of diversification is known as unrelated diversification because this company is changing to a completely different industry. By entering a new industry, completely unknown and untouched, Electric Solutions needs to have well trained employees who are specialized in this area in order to develop these products which are very complex. The company should consider that the costs of training employees will be high since few people know about the production of solar products. Moreover, the company has to spend money in a thorough market research in order to know if their product will be accepted. Also, once established in the market they need to consider that they need to develop strong marketing strategies because people don’t not know much about this renewable resource so they need to be educated so that they can know how to use it. Moreover, the company has to invest in the facilities for the development of this product which will be extremely expensive so they will need to spend a lot of money in investment.
8. What considerations should be taken by a firm considering changing of direction to a new market? How does this change could impact the firm’s mission statement?
The firm should analyze the environmental trends, and anticipate unexpected events. The things that should be taken into account are:
• Competitive intelligence, which has to do with market share information, competitor’s innovations, and come out with strategies to manage the situation in a favorable way.
• When you go international; how the domestic, foreign and international forces can affect you. Also and most importantly, examine the entry barriers imposed by governments like: infant industry protection, price controls, quotas, tariff barriers, and also the industry type and behavior, which could be monopolistic or could apply dumping techniques.
• Another consideration is the international product life cycle, since in one country the product could be just going through introduction while in others it is already a mature product.
• A SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats) and the value chain requirements from the new market should be examined.
• The STEP (Socio-cultural, Technological, Economical and Political-Legal forces)
It is important to have a clear mission statement and attach to it, to the procedures and to the objectives of the company, because the firm might lose focus because of the distractions that the external environment could present, and by trying to adjust to the new market, it could start doing things against the company’s initial mission statement.
9. What advantages can be gained by being the first mover.
By being first movers, Sungen has many advantages. One of the biggest advantages is that since it is the pioneer, people will have it as the pioneer and more experienced company in the market so they will prefer buying products from them since they are more qualified with this product’s development. In other words, Sungen Ltd. Will be creating consumer loyalty because of the preference they have among customers. Also, since they are the first to produce this product, people will trust more their product since they hav e already been used and their quality has been correctly tested. Moreover, since it has consumers’ loyalty, their positioning will the best among every other competitors because the image they have will be that they are the best among every other because they are the first ones in the market. As a consequence, since more consumers will be buying more products from this company, this means that its market share will increase and they will be the leaders in the market. Furthermore, since people are trained and updated for the development of this product, their experience curve is high and they will be able to train future employees reducing training costs in a company from a 20 to a 30%. Sungen Ltd. has to consider all the advantages it has from being pioneers, first movers, and once established in the market, it should be aware of its competitors because they will imitate its every movement and if well done, then people might consider the fact of changing from supplier.
10. Develop a SWOT analysis for Sungen.
11. What are the benefits and constrains of using JITI system
Benefits
• Lower warehouse costs because stock is not stayed, it is delivered as asked.
• Reduces investment in inventory
• Reduces shortage cost.
• Better control over costs (carrying cost is reduced)
• Better relationship with suppliers
• Improve cash availability (money is not freeze in inventory)
• Reduce cost of inventory that will affect cost of sales.
Constrains
• Delays on delivery equipment to customers causing dissatisfaction because they relay specifically on suppliers.
• Ordering costs increases
• Highly dependable on suppliers, is the center of all customers problems because the bargaining power of suppliers, Sungen cannot control the quality of the product or any delays the suppliers have, causing dissatisfaction and possible lost of customers; a satisfied customer brings 5 new customers, a dissatisfied makes loose 10 customers.
• Cost of implementing communication suppliers; because they need to be in constant contact with the supplier it rises the cost of communication, telephone bills, mailing, etc.
• There is no chance to meet unexpected demand because they need to ask the suppliers and depend on their response or according to their time of production, creating risks to loose customers.
• Do not have the ability to reduce costs and increase profit if they keep stock and prices rise or inflation increase, because they order and sell at the same time, so they cannot have that certain chance.
• Increase ordering cost.
• Production highly dependable on supplier’s compliance with delivery times.
• Need to be close to suppliers.
• Cost of implementing communication channels with suppliers.
12) SunGen manufacturing approach is to develop customized goods. Mention advantages and disadvantages of employing this approach. Mention advantages and disadvantages of employing this approach. You must cover the production, marketing and financial areas.
SunGen customized goods have three types of production process:
Process Focus:
 This process has low volume
 High variety of goods.
 Variable cost prevails
 Finished goods are to order not to store
 Cost estimated prior the job, but its only known after the good is finished
 Skilled labor
 High customization
Repetitive Focus
 Assembly line modules
 Employees are moderately trained
 Fixed costs/variable costs are in balance
 Fixed cost managed by degree of flexibility of the firm
 Just in time inventory is required
Product Focus
 High volume, low variety of goods (paper, steel, aluminum)
 Variable costs are low but fixed costs are high
 Low skilled labor
 Production is forecasted
 Finished goods are stored
 High standarization
13. Advantages and Disadvantages of Sun Gen Ltd working at full capacity.
Advantages
 Economies of scales
 High turn over (high sales)
 Fix cost per unit will decline
 Efficient resource utilization
 Better allocation of resources, don’t have misused resources
 Good value chain implementation.
Disadvantages
 Not possible to meet unexpected demand without incurring in high costs (extra hours, quality declines consequence of fatigued employees and lack of motivation, potential higher cost of material
 In order to improve production, you need high investment in new factories machinery (long-term)
 Creation of night shift of employees (high costs)
 Seasonal/ cyclical nature of demand doesn’t justify investment in new factories
 Cost of outsourcing production (potential high monetary cost and lack of control over quality
 Variable cost increases-marginal contribution declines
14. What alternatives are available for Sungen in order to deal with unexpected demands that would be impossible to be covered by the firm as a consequence of not having available capacity to satisfy an unexpected demand?
An alternative for Sungen can be to have a surplus of electrical equipment. This means that they could have a warehouse in which they can have many electrical equipments. So if there is a demand for the products, they can have enough of them, instead of being assembled as soon as an order is received from customers; this means that Sungen holds minimal levels of stock. Also what Sungen should worry about is about their employees, because many of the production staff are expressing their concerns about the unpredictable nature of the hours they are expected to work. Employees in Sungen had a hard work, because they have to assemble the solar equipments as soon a customer wants it, so Sungen should motivate their employees, and give them flexible work hours or compress work week, payment for their performance, etc. Workers will be offered a certain number of hours each week according to the level of demand. A proportion of workers will be placed on temporary contracts.
what paper is this taken from??
it must be TZ2 cos it sure as hell isn't tz 1
thats the one we'r gonna get!!! im THRILLED! thanks!! 
TZ2? are you sure?
hi,
the links to the may 2005 business and management paper 1 are not available anymore...could u kindly post paper 1 and 2 again as i need them...i need the SL papers...
thanks!!
the links to the may 2005 business and management paper 1 are not available anymore...could u kindly post paper 1 and 2 again as i need them...i need the SL papers...
thanks!!
hey ppl,
im new to this blog, i jus got really good nots on this case study...im posting the link...it wil be vry helpful
http://www.patana.ac.th/linklearn/Link+Learn_search.asp
there is everythin in there
toodles
im new to this blog, i jus got really good nots on this case study...im posting the link...it wil be vry helpful
http://www.patana.ac.th/linklearn/Link+Learn_search.asp
there is everythin in there
toodles
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